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Policy challenges in the life sciences industries in the age of Trump

Written by: | JKamp@wileyrein.com | Dated: Tuesday, April 25th, 2017

By John Kamp • Executive Director of the Coalition for Healthcare Communication

While the future of the biopharma and device industries is mostly dependent on what happens in labs and clinical trials, their ability to innovate and successfully market medicines, devices and services operates in a policy soup often flavored by who occupies senior positions in the White House, Congress, the Supreme Court, the Department of Health and Human Services and the Food and Drug Administration.

Right now, President Donald Trump has put himself right in the center of healthcare policy; meeting face to face with CEOs of the life sciences industry, negotiating directly with House Speaker Paul Ryan and other Members of Congress regarding the failed Trump/Ryan American Health Care Act of 2017, and meeting directly with Democratic members on drug prices.

Indeed, Trump has focused his favorite weapon – Twitter – on everything from killing Obamacare to lowering drug prices. Although medical marketing so far has escaped the Twitter sword, who knows what may become his next target?  Companies and trade associations have stayed up nights preparing for possible instant notoriety of the worst kind. And, best they should because the press and policy makers cover, comment, examine and amplify the reach of every Tweet.

Recall just a few utterances and Tweets from Trump on drug prices while he was the candidate and later the president-elect:

“They’re getting away with murder!”

“We’re going to start bidding!”

“We’re going to save billions of dollars!”

Trump’s statements and actions as president have been more nuanced, complicated, contradictory and in many ways untraceable. (But there is no reason to expect we’d be treated differently from any other industry.) Consider these more recent pronouncements and positions:

1. Trump statements on “repeal and replace” of Obamacare legislation often have been vague and shifting. Even now, there is no clear path forward for Trumpcare/Ryancare 2.
2. Trump had a warm meeting with the CEOs where he emphasized the value of drug innovation, the leadership of domestic producers, and promised to ensure that other companies “paid their fair share” through trade agreements.
3. Trump promised to lower taxes, enable repatriation of foreign profits and to “deregulate” and “reform the FDA.” In short:  “You guys are going to do great!”
4. But after that meeting criticism of drug pricing resumed. Indeed, Trump sometimes has favored re-importation and government negotiation of purchase prices, but other times he has deflected and avoided the topic.

The most meaningful policy happening so far has been the somewhat spectacular failure of the Trump/Ryan “Repeal and Replace” Obama Care bill. While huge for the public health and patients throughout the country, the defeat was quietly, on balance, pretty good for pharma.

Remember, PhRMA and pharma supported the Affordable Care Act (ACA). There, the cost/benefit balance favored the industry, considering four major provisions:

1. ACA coverage created tens of millions of new customers; Trumpcare risked up to 24 million insured.
2. The ACA increased the Medicaid rebates (discounts) from 15 percent to 23 percent; under Trumpcare, discounts stayed, but the number of insured dropped.
3. The ACA drug fee of 1 percent would have been dropped under Trumpcare, a small windfall for the drug industry.
4. The Essential Health Benefits (EHBs) of the ACA could have been eliminated under Trumpcare, including the possibility of reducing the drug benefit.

That brings us to the other huge issue for pharma: drug prices. Remember, prices, profits and promotional spend are all linked together. If prices and profits fall, spend will drop dead.

Pressure on drug/device/bio pricing is intense and comes from multiple sources, not just the threat of direct government intervention. The polls are clear that voters want lower prices, and most voters place the largest share of the blame for current out-of-pocket cost on big pharma. That’s not to say that the PhRMA “Go Boldly” ad campaign stressing innovation and its aggressive public relations campaign aimed at insurers, PBMs and other payers are not working. They are moving the needle, but slightly and slowly.

Most importantly, increased market pressure has been chipping away at pricing flexibility. Indeed, Medicare Part D insurers and payers already negotiate the best prices for their systems and customers. Further, the increasing power of payers to set formularies and give priority access to companies granting deep discounts has taken a serious toll.

Meanwhile, public shaming by Democrats and Republicans alike, especially of the anomalous generic monopolists, is working. Never underestimate the power of a great example like EpiPen or a bad boy actor like Martin Shkreli. Moreover, a few major drug companies, including Allergan, J&J and Lilly, have made pledges to control price increases.

But, perhaps most dangerous are the actions of Trump himself, acting as Negotiator-in-Chief, talking down aggressive pricing and consorting with strange allies – liberal Democrats – on tactics to lower prices. Watch carefully the continued discussions led by Rep. Elijah Cummings, D-Md., supporting transparency, re-importation and direct price negotiation.

In short, the president matters. None more so than this president, who has staked his presidency on his ability to negotiate the best deal for voters. Stay tuned.

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